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Last modified
7/29/2009 10:37:37 PM
Creation date
10/11/2006 11:54:50 PM
Metadata
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Template:
Water Supply Protection
File Number
8030
Description
Section "D" General Correspondence - Other Organizations/Agencies (Alpha, not Basin Related)
Date
9/25/1972
Author
J. A, Riggins, Jr.
Title
Destroying Resource Development with Artificial Discount Rates (Talk Given Before the 1972 Western States Water and Power Consumers Conference)
Water Supply Pro - Doc Type
Report/Study
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<br />-14- <br /> <br />COSTS, TO COf'iPUTE THE AVERAGE ANNUAL BENEFITS, ALL OF THE FUTURE <br />BENEFITS ARE BROUGHT BACK TO THEIR PRESENT WORTH, AND THEN SPREAD <br />FORWARD TO GIVE THE ANNUAL AVERAGE. <br /> <br />THIS PUTS AT A COMPARATIVE DISADVANTAGE THOSE PROJECTS <br />IN WHICH BENEFITS ACCRUE LATER WHEN COf1PARED WITH PROJECTS IN WHICH <br />BENEFITS ACCRUE EARLIER -- EVEN THOUGH THE TOTAL UNDISCOUNTED <br />BENEFITS WERE TO BE THE SAnE OVER PROJECT LIFE, THE HIGHER THE <br />RATE OF INTEREST, THE GREATER IS THIS DOWNGRADING OF FUTURE <br />I NVESTI1ENTS, BECAUSE THE I R . PRESENT vlORTH I S LOWERED, <br /> <br />ONE OF THE REASONS THAT GOVERN/'lENT ENTERS INTO FIELDS NOT <br />ADEQUATELY COVERED BY PRIVATE'ENTERPRISE IS BECAUSE: PRIVATE <br />INVESTORS WISH TO REAP THEIR REWARDS QUICKLY, . THUS, PRIVATE <br />INVESTORS LOOK VlITH RELATIVE DISFAVOR AT INVESmENTS OF LONG- <br />RANGE, AND ESPECIALLY IF THEIR BENEFITS PEAK AFTER MID-POINT OF <br />THE Ml0RTIZATION PERIOD. <br /> <br />SO, GENTLEMEN, LET ME CONCLUDE BY STATING -- AS PERHAPS <br />MANY HAVE SAID BEFORE -- THAT THIS PROPOSED CONCEPT OF "OPPORTUNITY <br />COST OF 110NEY" AS THE NEVI APPROACH TO FINANCH1G FEDERAL PROJECTS <br />WOULD, IHTHOUT QUESTION, BRING FEDERAL WATER RESOURCE DEVELOprmn <br />TO A HALT, THE SO-CALLED "CHEAP PROJECTS" HAVE ALL BEEN BUILT. <br />HIGHER I NTEREST COSTS CArl HAVE NO OTHER EFFECT. <br />
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